divorce and dividing family property

Divorce and dividing family property

Is Family Property Split 50 50 in Divorce or Separation?

The quick and dirty answer is, Yes. The Family Law Act says family property is divided 50/50 between spouses unless it is significantly unfair to do so. However, you need to first determine what constitutes “family property”. To do that, you need to know the applicable property division scheme in BC.

In BC, property division upon breakdown of relationship is set out in the Family Law Act. The BC Family Law Act divides property in two categories: Family Property and Excluded Property.

What is Excluded Property?

Generally speaking, excluded property includes property that you bring to the relationship. This also includes gifts from third parties, and inheritance, etc.

The list of what constitutes excluded property is set out in section 85 of the Family Law Act.

This includes:

  • property acquired by a spouse before the relationship between the spouses began;
  • inheritances to a spouse;
  • gifts to a spouse from a third party;
  • a settlement or an award of damages to a spouse as compensation for injury or loss, unless the settlement or award represents compensation for
    • loss to both spouses, or
    • lost income of a spouse;
  • money paid or payable under an insurance policy, other than a policy respecting property, except any portion that represents compensation for
    • loss to both spouses, or
    • lost income of a spouse;
  • property referred to in any of paragraphs (a) to (d) that is held in trust for the benefit of a spouse;
  • a spouse’s beneficial interest in property held in a discretionary trust to which the spouse did not contribute, and that is settled by a person other than the spouse;
  • property derived from property or the disposition of property referred to in any of paragraphs (a) to (f).

If you can show that your beneficial interests or property was your excluded property then only the gain in the value of the property is subject to division.

You can also trace a property to your excluded property (i.e. if you sell your excluded property and buy a new property with your excluded property you may be able to get the exclusion).

However, the tracing provisions of the Family Law Act become complicated if you sell your excluded property and purchase a new property in joint names with your spouse or you transfer your excluded property to your spouse’s name. Under these circumstances, you may not be able to claim the exclusion.

What is Family Property?

Family property includes all assets that is in the name of either spouse at the time of the separation or any asset that the a spouse has a beneficial interest as at separation. Property or beneficial interest acquired post separation may be family asset, if acquired with family assets.

As per section 84 of the Family Law Act, family property may include:

  • a share or an interest in a corporation;
  • an interest in a partnership, an association, an organization, a business or a venture;
  • property owing to a spouse as a refund, including an income tax refund, or in return for the provision of a good or service;
  • money of a spouse in an account with a financial institution;
  • a spouse’s entitlement under an annuity, a pension plan, a retirement savings plan or an income plan;
  • other than certain trusts, property, that a spouse disposes of after the relationship between the spouses began, but over which the spouse retains authority, to be exercised alone or with another person, to require its return or to direct its use or further disposition in any way;
  • that part of trust property contributed by the a spouse
    • in which the spouse is beneficiary,
    • has vested interest not subject to divestment
    • the spouse has the power to transfer to himself/herself that party of trust property; and
    • the spouse has the power to terminate the trust and upon termination the the trust property goes back to the spouse.
  • the amount by which the value of excluded property has increased since the later of the date the relationship between the spouses began, or the excluded property was acquired.

Key Points about Property Division upon separation/divorce in BC

  1. Just because a property is classified as excluded property, does not mean that the entire property is excluded from division. The gain in the value of your excluded property is subject to division.
  2. Property acquired during the relationship is family property, subject to division.
  3. Family Law Act allows for tracing of excluded property. This happens when, for example, you had a house prior to the relationship, sold the house and used the net sales proceeds to purchase a new property during the relationship. In some circumstances, you may be able to claim exclusion. However, if you put the new property under both names
    (i.e. you and your spouse), or only under your spouse’s name, you may lose the exclusion.
  4. You may lose your exclusion, if you commingle funds with your spouse.
  5. Property acquired post separation may be considered family property, if it is traced to a family asset.
  6. Family debt is debt incurred during the relationship and subject to division. Debt incurred post separation can be considered family debt, if incurred to maintain family property.
  7. Family asset is split 50/50 unless you can show that is significantly unfair to divide it equally.
  8. Talk to a lawyer before engaging in any serious discussions about division of family assets and debts.

The property division scheme under the Family Law Act is complicated. We strongly recommend that you contact an experienced family law lawyer to find out what your rights and obligations are before engaging in any serious discussions with your ex about division of family assets.

Contact us to book your initial consultation with our seasoned Vancouver property division and divorce lawyers. We are here to help.